After the stock market mania over the past week and a half, you may think Corporate America has contributed to the unrest by reporting a big downturn in profits. After all, profit is what should drive stock prices over the long term.
But that hasn’t been the case. During this earnings season, a vast majority of companies — 69% of the SP 500 — have reported earnings that were better than analysts were expecting. For the SP 500 overall so far this earnings season, earnings are up an impressive 18.9% from last year’s levels.
What Happened Last Week
Last week, Disney (DIS) led the charge reporting earnings of $0.78, easily outpacing the $0.72 analysts expected. But that wasn’t enough to keep shares from tumbling on a weak outlook.
At Macy’s (M), revenue grew 7.3% to $5.94 billion, and earnings per share of $0.55 topped the $0.49 analysts had expected. The retailer had very upbeat comments in its earnings report, showing that maybe we’re writing the consumer off too quickly.
A broad look at the SP 500 shows that, on average, companies have reported earnings that were 7.2% higher than expectations, with only telecom coming in lower than expected. Information technology and financials have shown the most surprising earnings on the upside.
Source: Capital IQ Consensus Estimate, a division of Standard Poor’s.
What to Watch for This Week
It’s a focus on retail this week with Home Depot (HD) and Wal-Mart (WMT) highlighting the earnings reports. Analysts are expecting earnings per share of $0.82 and $1.08, respectively. With a market focused on consumer confidence and a shaky housing recovery, there will also be a lot of focus on what management sees for the third quarter.
Dell (DELL) reports earnings after the bell Tuesday, giving us a peek into the health of the PC market. Analysts are expecting earnings per share of $0.49.
We’ll be providing our feedback on these earnings reports as they happen throughout the week. Until then, reading earnings reports and listening to conference calls can give you a head start on analyzing what’s being reported.
Motley Fool contributor Travis Hoium owns shares of Disney. The Motley Fool owns shares of Wal-Mart. Motley Fool newsletter services have recommended buying shares of Home Depot, Disney, and Wal-Mart, as well as creating a diagonal call position in Wal-Mart.